Notice Annual General Meeting Director s Report. Pattern of Holding of the Shares. Statement of Compliance with the Code of Corporate Governance

Transcription

1 Zephyr Textiles Limited ANNUAL REPORT 2018

2 Company Information Notice Annual General Meeting Director s Report Horizontal Analysis Vertical Analysis Statement of Value Addition Financial Highlights Graphical Representation DuPont Analysis Pattern of Holding of the Shares Statement of Compliance with the Code of Corporate Governance Review Report to the Members on Statement of Comliance with Best Practices of Code of Corporate Governance Auditor s Report to the Members Contents Statement of Financial Position Profit and Loss Account Statement of Comprehensive Income Cash Flow Statement Statement of Changes in Equity Notes of the Financial Statements Director s Report in Urdu Proxy Form Urdu Proxy Form Zephyr Textiles Limited 02

3 BOARD OF DIRECTORS: AUDIT COMMITTEE: Mr. Mussaid Hanif Mr. Burhan Muhammad Khan Mr. Rana Kamal Ud Din Ms. Tahniat Mussaid Ms. Sabah Burhan Ms. Sarah Mussaid Ms. Nuzhat Kamran Ms. Nuzhat Kamran Mr. Rana Kamal Ud Din Ms. Tahniat Mussaid CEO Chairperson Chairperson/Member Member Member HR & REMUNERATION COMMITTEE: Ms. Subah Burhan Mr. Burhan Muhammad Khan Ms. Nuzhat Kamran Chairperson/Member Member Member CHIEF FINANCIAL OFFICER: Mr. Naveed Aleem Company Information COMPANY SECRETARY: AUDITORS: LEGAL ADVISOR: BANKERS TO THE COMPANY: MILLS: Mr. Abdul Jabbar Azhar Zafar & Company Cornelius Lane & Mufti Advocate and Solicitors NawaeWaqt House, 4 ShahraheFatima Jinnah, Lahore 54000, Pakistan Habib Bank Limited Allied Bank Limited Askari Bank Limited United Bank Limited Habib Metropolitan Bank LTD Bank Al Habib Limited 1 km, Balloki Bhai Pheru Road Bhai Pheru. Phone : , Fax : km, Gulshan Adda, Jumber Khurd, District Kasur. Chartered Accountants National Bank of Pakistan Mcb Bank Limited The Bank Of Punjab Faysal Bank Limited Meezan Bank Limited Silk Bank Limited (Weaving unit & Power plant) (Towel Unit) REGISTERED & HEAD OFFICE: 3rd Floor, IEP Building, 97 B/DI, Gulberg III, Lahore. info@zephyr.com.pk Website: Phone : Fax : Note: Zephyr s Company Information & Financial Statements are also available at the above website. 03 Annual Report 2018

4 Notice is hereby given that the 20th Annual General Meeting of Zephyr Textiles Limited ( ZTL or the Company ) will be held at the Registered Office of the Company, 3rd Floor IEP Building, 97 B/DI, Gulberg III, Lahore on Saturday, October 27, 2018, at 10:30 AM to transact the following business: Ordinary Business: 1. To confirm the minutes of the last Extra Ordinary General Meeting dated August 16, To approve Final Cash 5% [i.e. Rs.0.50/ Per Ordinary Share] as recommended by the Board of Directors To receive, consider and adopt the audited accounts of the company for the year ended June 30, 2018 together with the Directors' and Auditor's report thereon. To appoint auditors for the year ending June 30, 2019 and to fix their remuneration. The present Auditors M/S Azhar Zafar & Company, Chartered Accountants, retire and being eligible offer themselves for reappointment. Special Business: To obtain consent of the shareholders in terms of S.R.O. 470(1)/2016 dated May 31, 2016 issued by Securities of Exchange Commission of Pakistan, for the transmission of annual audited accounts, notice of the general meetings and other information contained therein of the Company either through CD or DVD or USB or in hard copy (Book form): Resolved that consent & approval of the members of Zephyr Textiles Limited (the Company ) be and is hereby accorded for the transmission of annual audited accounts, notice of the general meetings and other information contained therein of the Company to the members for future years commencing from the year ending June 30, 2019 through CD or DVD or USB instead of transmitting the same in hard copies. To transact any other business with the permission of the Chair. Lahore: Friday October 05, NOTES: By Order of the Board Abdul Jabbar Company Secretary Book Closure Notice: Share transfer books of the company will remain closed from October 20, 2018 to October 27, 2018 (both days inclusive) and no transfer will be accepted during this period A Shareholder entitled to attend and vote at this meeting may appoint another shareholder as his/her proxy to attend and vote as his/her proxy to attend and vote on his/her behalf. The instrument appointing a proxy and the power of attorney or other authority under which it is signed or a naturally certified copy of the power of attorney must be received at the registered office of the company, duly stamped, signed and witnessed not later than 48 hours before the meeting. Notice of Annual General Meeting CDC Account holders will further have to observe the following guidelines, as laid down in Circular O 1 dated January 20, 2000, issued by the Securities and Exchange Commission of Pakistan: Zephyr Textiles Limited 04

5 Notice to Shareholders who have not provided CNIC: CNIC of the shareholders is mandatory in terms of directive of the Securities and Exchange Commission of Pakistan contained in S.R.O. 831(1)/2012 dated July 05, 2012 for the issuance of future dividend warrants etc. and in the absence of such information, payment of dividend may be withheld in term of SECP's above mentioned directive. Therefore, the shareholders who have not yet provided their CNICs are once again advised to provide the attested copies of their CNICs directly to our Shares Registrar without any further delay. Electronic Transmission of Financial Statements Etc: Notice of Annual General Meeting SECP through its notification No. SRO 787(1)/2014 dated September 8, 2014 has allowed companies to circulate Annual Audited Financial Statements along with Notice of Annual General Meeting through instead of sending the same through post, to those members who desires to avail this facility. The members who desire to opt to receive aforesaid statements and notice of AGM through are requested to provide their written consent on the Standard Request Form available on the Company's website: Deduction of Withholding Tax on Dividend: Pursuant to the provisions of the Finance Act 2018 the rates of deduction of income tax from dividend payments under the Income Tax Ordinance have been revised as follows: i. Filler 15% ii. Non Filler 20% All shareholders are advised to check their status on Active Taxpayers List (ATL) available on FBR Website and may, if required, take necessary actions for inclusion of their name in ATL to avail the lower rate of tax deduction. Deduction of Withholding Tax on Dividend in case of Joint Account Holders: All shareholders who hold shares jointly are requested to provide following information regarding shareholding proportions of Principal Shareholder and Jointholder(s) in respect of shares held by them to our Share Registrar THK Associates (Pvt) Limited, latest by October 20, 2018, otherwise each joint holder shall be assumed to have an equal number of shares. Name of the Company Folio No. / CDC A/C No. No. of Shares Held Principal Name & CNIC Zephyr Textiles Limited Shareholder Joint Shareholder(s) Shareholding Proportion (No. of Shares) Name & CNIC Shareholding Proportion (No. of Shares) Signature of Primary Shareholder 05 Annual Report 2018

6 Exemption of Withholding Tax: Withholding tax exemption from dividend income, shall only be allowed if copy of valid tax exemption certificate is made available to our Share Registrar Office, Share Registrar THK Associates (Pvt) Limited, up to October 20, Zakat Declaration (CZ50): Zakat will be deducted from the dividends at source under the Zakat & Usher Laws and will be deposited within the prescribed period with the relevant authority. Please submit your Zakat declarations under Zakat and Usher Ordinance, 1980 & Rule 4 of Zakat (Deduction & Refund) Rules, 1981 CZ50 Form, in case you want to claim exemption, with your brokers or the Central Depository Company of Pakistan Limited (in case the shares are held in CDCSub Account or CDC Investor Account) or to our Share Registrar, M/s. THK Associates (Pvt) Limited, The Shareholders while sending the Zakat Declarations, as the case may be must quote company name and their respective folio numbers. Shareholders should also notify our Share Registrar, THK Associates (Pvt) Limited regarding any change in their addresses Mandatory Payment of Cash Dividend through Electronic Mode: Securities and Exchange Commission of Pakistan through its Circular No. 18 dated August 01, 2017 has made it mandatory that Cash Dividend payments after November 01, 2017 shall be through electronic mode only and physical dividend warrants will not be issued / dispatched therefore the shareholders who have not provided their bank account details so far are advised to provide their below electronic dividend mandate information to our Share Registrar, M/s. THK Associates (Pvt) Limited, and update their CDC accounts/ Sub accounts as the case may be, up to October 20, 2018, enabling the Company to credit your dividend promptly. Folio No. / Investor Account Number / CDC Sub Account No. Title of Account IBAN Number Bank Name Branch Branch Address Mobile Number Name of Network (if ported) Address Notice of Annual General Meeting Signature of Shareholder Zephyr Textiles Limited 06

7 STATEMENT UNDER SECTION 134(3) OF THE COMPANIES ACT This statement is annexed as an integral part of the Notice of the Annual General Meeting of the company to be held on October 27, Circulation of Financial Statements Etc. through CD/DVD/USB: Notice of Annual General Meeting The Securities and Exchange Commission of Pakistan (SECP) vide SRO No. 470(1) 2016 dated May 31, 2016, has allowed listed companies to circulate their Annual Audited Accounts (i.e. the annual balance sheet and profit and loss account, auditor's report and director's report) to its members through CD/DVD/USB at their registered addresses instead of sending them in hard copies, subject to approval obtained from shareholders in General Meeting. Accordingly, approval is hereby sought from members of the Company to comply with the requirements of said SRO vide an ordinary resolution. Subject to the approval of resolution in the AGM, the company will circulate its annual accounts in future through CD/DVD/USB. However, members will have the right to request hard copies free of cost at their registered addresses after submitting the Standard Request Form which shall be made available on Company website. While members who wish to receive hard copies for all future annual audited accounts shall also require to give their preference in writing. The directors of the Company have no direct or indirect interest in this agenda except to the extent of their respective directorships and /or shareholdings. 07 Annual Report 2018

8 The Board of Directors are pleased to present the 20th Annual Report along with audited accounts of the Company for the year ended June 30, Performance Review Business Performance The Company recorded sales of Rs billion, which is 14% higher than the last year s sales of Rs.3.73 billion, which is the the highest sales volume achieved in the history of the Company. Strong sales performance was witnessed in all the segments of business. Gross profit for the year amounted to Rs million (10.95% of sales), compared to last year s gross profit of Rs million (10.98% of sales). The slightly lower gross profit inspite of higher sales is due to increase in input costs which could not be passed on to the customers. Distribution cost for the year is higher than previous year because of increased turnover. Administration cost slightly increased by 5.40% due to inflationary effect. Finance cost for the year stands at Rs million as compared to last year s finance cost of Rs million due to a notional expense of Rs million charged at once for winding up of long term loan from The Bank of Punjab. Excluding this impact, finance cost remains at Rs.121 million inspite of repayment of long term loans of Rs million. This is due to increased borrowings resulting from higher working capital requirements. The Company managed to earn a profit after tax of Rs million compared to Rs million in the same period of last year despite the very challenging domestic and international business environment. Description % Increase Net sales 4,252,317,435 3,728,955, Gross profit 465,471, ,655, EBITDA 298,119, ,937, Depreciation 168,906, ,179, Finance cost 157,956, ,824, Pretax profit 129,212,341 89,757, After tax profit 103,174,825 68,927, EPS Dividend and Appropriations For the current year ended June 30, 2018, the Board of Directors recommended payment of Rs.0.50 per share (5%) as final cash dividend (2017:Nil). There is no other appropriation of profit. Directors Report Business Improvement Improvement in business processes is paramount for any industry to stay competitive in today s market. The Company is continuously engaged in business process reengineering to optimize benefits from technological functions. Initiatives are underway that will improve efficiencies, improve lead times and reduce wastages. The Company is continuously looking at way to optimize systems to ensure proper visibility and monitoring of key metrics and is placing a greater emphasis on reporting through its ERP system. Business Review Overall business environment remained challenging during the year under review. Unprecedented rise in the prices of cotton and yarn left the customers in the state of indecision otherwise the growth might have been much better. Nevertheless, against all odds, we were able to maintain and even increase our business share with existing customers. In our product mix, a planned shift has happened towards finished fabric category which carries attractive margins. As more competition exists in this segment, we have witnessed immense price pressure either to maintain or reduce it. Considering global retail environment, cutthroat competition and high cost of doing business in Pakistan, the government announced incentive package for export oriented sectors of the country. Zephyr Textiles Limited 08

9 Risks and Opportunities Zephyr Textiles Limited takes risks and creates opportunities in the normal course of business. Taking risk is important to remain competitive and ensure sustainable success. Risks and opportunities are properly weighted and considered before making any choice in the Company. Decisions are formulated only if opportunities outweigh risks. We are operating in a competitive environment where innovation, quality and cost matters. This risk is mitigated through continuous research and development and persistent introduction of new technologies under BMR. Head of all business divisions meet at regular basis to form an integrated strategy towards tackling the challenges faced by the Company Business Risks The Company faces following business risks: Raw Material Availability and Price Directors Report The supply and prices of yarn is subject to uncertainty of nature and demand dynamics of local and international cotton markets. There is always a risk of scarce availability of cotton and spiraling prices in the market. The Company mitigates this risk by procurement of the cotton yarn at the time of sale contract to nullify the negative impact. Export Demand and Price The exports are about forty percent of our sales. We face the risk of competition and decline in demand of our products in international markets. We minimize this risk by building strong relations with customers, broadening our customer base, developing innovative products without compromising on quality and providing timely deliveries to customers. Energy Availability and Cost The rising cost and unavailability of energy i.e. electricity and gas shortage is a major threat to manufacturing industry. If this risk is not controlled, it can make us vulnerable in the local as well as international markets. The Company has mitigated this risk by installing power plants for generating electricity and securing backup power supplies at both manufacturing facilities of the Company. Financial Risks The Board of Directors of the Company is responsible to formulate the financial risk management policies which are implemented by the Finance Department of the Company. The Company faces the following financial risks: Currency Risk The Company is exposed to currency risk arising from various currency exposures, primarily with respect to United States Dollar (USD), Pound Sterling (GBP) and Euro. The Company s foreign exchange risk exposure is restricted to the bank balances and the amounts receivable/ payable from/to the foreign entities. 09 Annual Report 2018

10 Interest Rate Risk The Company s interest rate risk arises from long term financing, short term borrowings, term deposit receipts and bank balances in saving accounts. Fair value sensitivity analysis and cash flow sensitivity analysis shows that the Company s profitability is not materially exposed to the interest rate risk. Credit Risk The Company s credit sales are exposed to trade bad debts. This risk is mitigated by the fact that majority of our customers have a strong financial standing and we have a long established business relationship with all our customers. We do not expect nonperformance by our customers; hence, the credit risk is minimal. Liquidity Risk It is at the low level due to the availability of enough funds through committed credit facilities from the Banks and Financial institutions along with cash generated from business operations. Opportunities The Company is in a position to avail and exploit a number of opportunities. Following is the summary of some exciting opportunities: Regionally diversified customer base across the world provides a sustainable growth to export sales; Vibrant local and international marketing network create demand for our products; Vertical integration makes it possible to exploit operational synergies; Adequate supply of cotton in the country; High population growth of the country is a source of suitable manpower and a stimulus in creating the demand for textile products. Corporate Social Responsibilty The Company has strong commitment towards corporate social responsibility and allocates sizable resources for the benefit of environment and society. Directors Report Environment Protection Textile manufacturing especially dyeing process can cause significant harm to environment if adequate measures are not taken to mitigate hazardous effects of textile process. The Company is deeply concerned and has established effluent treatment plants at its dyeing facility. Moreover, a project is underway for installation of a new waste water treatment plant which will increase existing capacity for treatment of waste water by 50 cubic meters per hour at production facility of Dyeing. Apart from an elaborated policy for tree plantation at its manufacturing facilities, the Company is planning to invest in solar technology for generation of energy to minimize the impact of CO2 emission. The Code of Conduct for employees also requires using the Company s facilities and processes in environmentally sustainable way. Energy Conservation In addition to investing in the alternative energy sources, conservation of energy sources are under special focus of the Company. The Company replaced all conventional tube lights with LED lights. Zephyr Textiles Limited 10

11 Occupational Safety and Health The Company has a comprehensive policy for health and safety standards. Workers are engaged in manufacturing activities after taking into account professional safety measures. Equal Opportunity Employer The Company takes pride in being an equal opportunity employer. The workforce of the Company comprises of people with diverse background including women. The Company believes that collective creativity of people with varied background is the reason for its growth over the years Corporate Governance Board of Directors Mr. Arbab Muhammad Khan resigned from directorship on May 2nd This casual vacancy was duly filled by appointing Mr. Rana Kamal Ud Din as the director of the Company till the next elections which was conducted after balance sheet date on August 16th 2018 for the period of next three years in accordance with the provisions of Companies Act Following are the directors of the Company reelected: Directors Report 1. Mr. Mussaid Hanif Executive Director/CEO 2. Mr. Burhan Muhammad Khan Executive Director 3. Mr. Rana Kamal Ud Din NonExecutive Independent Director 4. Ms. Tahniat Mussaid NonExecutive Director/Chairperson 5. Ms. Sabah Burhan NonExecutive Director 6. Ms. Nuzhat Kamran NonExecutive Independent Director 7. Ms. Sarah Mussaid NonExecutive Director Directors Training Program The Board of Directors have arranged Directors Training Program for the following in the year : Ms. Sarah Mussaid The Board of Directors of the Company consist of 7 Directors out of which the following four Directors have obtained a certificate for the Directors Training Program offered by a local institution that meets the criteria specified by the Securities and Exchange Commission of Pakistan ( SECP ): Ms. Tahniat Mussaid Ms. Sabah Burhan Ms. Sarah Mussaid Ms. Nuzhat Kamran The remaining three Directors have undertaken to either apply to SECP for an exemption or be certified prior to the expiration of the requisite deadline. Compliance of Corporate and Financial Reporting Framework We are committed to good corporate governance and do comply with the requirements of Code of Corporate Governance Regulation 2017 (CCG 2017) included in the listing regulations of Pakistan Stock Exchange Limited. The statement of compliance with the CCG 2017 is enclosed. 11 Annual Report 2018

12 Board Committees Audit Committee During the year there is one change in audit committee. Mr. Rana Kamal Ud Din appointed as a member of the audit committee. The Committee is comprised of all three nonexecutive members of the board. The chairperson of the committee is an independent director. The audit committee is performing its duties in line with its terms of reference as determined by the Board of Directors. During the year under review, four audit committee meetings were held, attendance position was as under: Name Designation Meetings attended Ms. Nuzhat Kamran Chairperson/Member 4 Ms. Tahniat Mussaid Member 4 Mr. Rana Kamal Ud Din Member 0 Mr. Arbab Muhammad Khan Retired 3 Human Resource & Remuneration Committee The HR and remuneration committee comprised of three members of whom two are nonexecutive directors and the Chairperson is a nonexecutive director. The Human Resource & Remuneration Committee is performing its duties in line with its terms of reference as determined by the Board of Directors. During the year under review, only one HR and Remuneration committee meeting were held and attendance position was as under: Name Designation Meetings attended Ms. Sabah Burhan Chairperson/Member 1 Mr. Burhan Muhammad Khan Member 1 Ms. Nuzhat Kamran Member 1 Meetings of the Board of Directors During the year under review, four meetings of the Board of Directors of the Company were held and the attendance position is as follows: S.No. Name of Directors No. of meetings attended 1. Mr. Mussaid Hanif 4 2. Mr. Burhan Muhammad Khan 4 3. Mr. Arbab Muhammad Khan 4 4. Mr. Rana Kamal Ud Din 0 5. Ms. Nuzhat Kamran 4 6. Ms. Tahniat Mussaid 4 7. Ms. Sabah Burhan 4 8. Ms. Sarah Mussaid 2 Directors Report Directors Statement In compliance of the Code of Corporate Governance, we give below statements on Corporate and Financial reporting framework: 1. Financial statements, prepared by the management of the Company, present fairly its state of affairs, the result of its operations, cash flows and changes in equity. Zephyr Textiles Limited 12

13 2. Proper books of account of the Company have been maintained. 3. Appropriate accounting policies have been consistently applied in preparation of the financial statements and accounting estimates are based on reasonable and prudent judgment. 4. International Financial Reporting Standards, as applicable in Pakistan, have been followed in preparation of financial statements and any departure there from has been adequately disclosed 5. The system of internal control is sound in design and has been effectively implemented and monitored. 6. There are no significant doubts upon the Company s ability to continue as a going concern. 7. There has been no material departure from the best practices of corporate governance, as detailed in the listing regulations. Auditors Directors Report The present auditors of the Company M/s Azhar Zafar & Company, Chartered Accountants have completed the annual audit for the year ended June 30, 2018, and have issued an unqualified audit report. The existing auditors will retire on conclusion of the Annual General Meeting of the Company, and being eligible; have offered themselves for reappointment for the year ending June 30, Earnings per Share (EPS) Earnings per share of the Company has increased from Rs.1.16 per share in the last year to Rs.1.74 per share in the year under review as a result of better profitability. Acknowledgement The board places on record its profound gratitude for its valued shareholders, banks, financial institutions and customers, whose cooperation, continued support and patronage have enabled the Company to strive for constant improvement. During the period under review, relations between the management and employees remained cordial and we wish to place on record our appreciation for the dedication, perseverance and diligence of the staff and workers of the Company. Mussaid Hanif Chief Executive Burhan Muhammad Khan Director Lahore September 28, Annual Report 2018

14 Horizontol Analysis (Rupees in Million) 2018 Variance vs Last Year Increase/ (Decrease) 2017 Variance vs Last Year Increase/ (Decrease) 2016 Variance vs Last Year Increase/ (Decrease) 2015 Variance vs Last Year Increase/ (Decrease) 2014 OPERATING RESULTS Sales net Cost of sales Gross Profit Distribution cost Administrative expenses Other operating expenses Financial cost Other operating income Profit/(Loss) before taxation Provision for taxation 4, , (81.49) , , (4.66) (6.12) (3.57) (78.44) (32.17) (17.65) 3, , (6.34) (6.80) (2.01) (3.60) (34.58) (10.97) (0.40) 3, , (10.53) (9.61) (19.12) (41.83) (13.86) 1, (11.61) 4, , PROFIT/(LOSS) FOR THE YEAR (35.60) BALANCE SHEET NONCURRENT ASSETS Property, plant and equipment Capital work in progress Long term deposits 1, (0.71) (100.00) , , (2.11) (100.00) (0.64) 1, (4.72) , TOTAL NONCURRENT ASSETS 2, (1.02) 2, , (2.67) 1, (4.13) 1, CURRENT ASSETS Stores, spare parts and loose tools Stock in trade Trade debts Loans and advances Trade deposits and short term prepayments Other receivables Investments Cash and bank balances , (23.19) (4.12) (56.31) (41.89) (21.60) (5.88) (23.00) (14.01) (2.34) (8.90) (85.65) (53.95) TOTAL CURRENT ASSETS 2, , , , (1.87) 1, TOTAL ASSETS 4, , , , (3.17) 3, CURRENT LIABILITIES Trade and other payables Accrued markup Short term borrowings Unclaimed Dividend , (5.42) (98.13) (36.62) Current portion of long term financing (17.42) (57.54) TOTAL CURRENT LIABILITIES 2, , , , (39.85) 1, WORKING CAPITAL (56.38) (169.61) (420.64) TOTAL CAPITAL EMPLOYED 2, , , (0.81) 2, , NONCURRENT LIABILITIES Long term financing Liabilities against assets subject to finance lease Deferred liabilities (23.53) (4.58) (2.80) (15.72) (0.41) (1.52) TOTAL NONCURRENT LIABILITIES (14.38) (4.07) (11.81) NET WORTH 1, , , , , NET WORTH REPRESENTED BY Issued, subscribed and paidup capital Accumulated Profit / Loss Surplus on revaluation of property, plant and equipment (8.42) (6.79) (6.87) TOTAL NET WORTH 1, , , , , TOTAL LIABILITIES 4, , , , (3.17) 3, Zephyr Textiles Limited 14

15 Vertical Analysis (Rupees in Million) % of Total % of Total % of Total % of Total 2018 Value 2017 Value 2016 Value 2015 Value 2014 OPERATING RESULTS Sales net Cost of sales Gross Profit Distribution cost Administrative expenses Other operating expenses Financial cost Other operating income Profit/(Loss) before taxation Provision for taxation 4, , , , , , , , , , PROFIT/(LOSS) FOR THE YEAR BALANCE SHEET NONCURRENT ASSETS Property, plant and equipment Capital work in progress Long term deposits 1, , , , , TOTAL NONCURRENT ASSETS 2, , , , , CURRENT ASSETS Stores, spare parts and loose tools Stock in trade Trade debts Loans and advances Trade deposits and short term prepayments Other receivables Investments Cash and bank balances , TOTAL CURRENT ASSETS 2, , , , , TOTAL ASSETS 4, , , , , CURRENT LIABILITIES Trade and other payables Accrued markup Short term borrowings Unclaimed Dividend 1, Current portion of long term financing TOTAL CURRENT LIABILITIES 2, , , , , WORKING CAPITAL (420.64) TOTAL CAPITAL EMPLOYED 2, , , , , NONCURRENT LIABILITIES Long term financing Liabilities against assets subject to finance lease Deferred liabilities TOTAL NONCURRENT LIABILITIES NET WORTH 1, , , , , NET WORTH REPRESENTED BY Issued, subscribed and paidup capital Accumulated Profit / Loss Surplus on revaluation of property,plant and equipment TOTAL NET WORTH 1, , , , , TOTAL LIABILITIES 4, , , , , Annual Report 2018

16 Statement of Value Addition Wealth Generated Year 2018 Year 2017 Amount Rs. % Amount Rs. % Sales Revenue Other Income Less: Material & Services Material & Factory Cost Administrative Cost Distribution & Other Cost 4,252,317,435 3,410,408 4,255,727,843 3,297,770,081 30,853,639 87,028,022 3,415,651,742 3,749,393,276 2,351,217 3,751,744,493 2,854,891,068 29,947, ,704,142 3,018,543,058 Total Wealth Generated Wealth Distributed To Employees 840,076, % 733,201,435 Year 2018 Year 2017 Amount Rs. % Amount Rs. 100% % Salaries & Benefits 375,969, % 359,787,097 To Government Tax 26,037, % 20,830,564 Worker Profit Participation Fund 6,862, % 4,820,498 Worker Welfare Fund 1,169, % 1,831, % 2.84% 0.66% 0.25% To Providers of Capital Dividends to Share Holders Mark Up/Interest on Borrowed Funds 157,956, % 121,824, % To Providers for Maintenance & Expansion of Assets Depreciation 168,906, % 155,179,845 Profit Retained 103,174, % 68,927, % 9.40% 840,076, ,201,435 Distribution Of Wealth To Employees, 45 % To Providers for Maintenance & Expansion of Assets, 32 % To Providers of Capital, 19 % To Government, 4% 375,969, ,081, ,956,372 34,069,006 Zephyr Textiles Limited 16

17 Key Operating and Financial Data of Last Six Years PROFIT AND LOSS June 30, June 30, June 30, June 30, June 30, June 30, (Rupees in Thousand) Sales 4,252,317 3,749,393 3,932,857 3,756,907 4,199,161 3,840,907 Cost of Sales 3,786,846 3,319,300 3,535,642 3,429,043 3,793,808 3,481,673 Gross Profit 465, , , , , ,234 Operating Profit plus other income 287, , , , , ,468 Financial & Other charges 157, , , , , ,684 Taxation 26,038 20,831 25,295 22,446 25,396 8,524 NET PROFIT AFTER TAX 103,175 68, , ,067 63, ,260 BALANCE SHEET Capital 594, , , , , ,287 Share subscription money Reserves 595, , , ,297 65,509 (31,341) Surplus on revaluation of fixed assets 351, , , , , ,216 NET WORTH 1,540,739 1,396,829 1,328,246 1,238,347 1,079,368 1,014,163 Long Term Liabilities 416, , , , , ,644 Deferred Liabilities 242, , , , , ,895 Current Liabilities 2,008,488 1,563,179 1,288,630 1,117,362 1,857,645 1,836,415 TOTAL LIABILITIES 2,667,285 2,333,168 2,090,698 2,026,790 2,292,584 2,405,955 TOTAL EQUITY & LIABILITIES 4,208,024 3,729,997 3,418,944 3,265,137 3,371,952 3,420,118 Fixed Assets 1,981,436 1,995,530 1,797,516 1,836,218 1,927,075 2,013,546 Capital Work in Progress 9,702 10,865 58,840 Long Term Deposits 22,499 19,287 7,823 7,873 7,873 3,299 Current Assets 2,204,090 1,705,478 1,613,606 1,410,181 1,437,004 1,344,433 TOTAL ASSETS 4,208,024 3,729,997 3,418,944 3,265,137 3,371,952 3,420,118 INVESTOR INFORMATION Break up value per share (Rs.) Bonus/Cash dividend (Rs. In '000) Earning Per Share (Rs.) Return on Equity (%) Return on Assets (%) FINANCIAL RATIOS Gross Margin (%) Net Margin (%) Current Ratio Long Term Debt to Equity ratio (%) Interest cover ratio (Times) Gearing ratio (%) Annual Report 2018

18 Graphical Representation Net Margin (%) Interest cover ratio (Times) Break up value per share (Rs.) Earning Per Share (Rs.) Gearing Ratio (%) Current Ratio Zephyr Textiles Limited 18

19 Sales (Rupees in Million) Gross Profit (Rupees in Million) , , , , , , , , , , , , , , , ,00.00 COST OF SALES Net Profit / Loss after tax (Rupees in Million) Details % Value in Millions Raw materials consumed , Stores consumed Packing, Sizing and lubricants consumed Fuel and power Salaries, wages and other benefits Processing charges Insurance Repairs and maintenance Travelling & Conveyance Depreciation Other production overheads Total , Cost of Sales Raw materials consumed Stores consumed 2.35 Packing, Sizing and lubricants consumed Fuel and power Salaries, wages and other benefits 8.30 Processing charges 5.04 Insurance Repairs and maintenance 0.21 Travelling & Conveyance 0.08 Depreciation 4.13 Other production overheads Annual Report 2018

20 DuPont Analysis Details Amount in "000" Values for the year ended 2018 Gross Revenues Cost of Sales Admin & Selling Exp Interest Expense Taxation Other Income Total Assets Total Liabilities 4,252,317 Tax burden 3,786,846 Interest burden 181,713 Net profit margin 157,956 Return on Assets 26,038 Ownership Ratio 3,410 Return on Equity 4,208,024 2,667, % 3.71% 2.43% 2.45% 36.61% 6.70% 1 Operating Profit Margin Gross Revenue () Admin & Selling Exp () Cost of Sales (=) Net Operating Income 4,252, ,713 3,786, ,758 Net Oprtg Income (+) Other Income () Interest Expense (=) Net Income 283,758 3, , ,212 Net Income () Taxation Gross Revenue (=) 129,212 26,038 4,252,317 Net Profit Margin 2.43% 2 Asset Turnover Ratio Gross Revenue Total Assets (=) Asset Turnover Ratio 4,252,317 4,208, Times 3 Owner's Equity Total Assets () Total Liabilities (=) Owner's Equity 4,208,024 2,667,285 1,540,739 4 Total Assets Total Liabilities (+) Total Equity (=) Total Assets 2,667,285 1,540,739 4,208,024 5 Return on Assets Net Profit Margin (X) Asset Turnover Ratio (=) Return on Assets 2.43% % 6 Ownership Ratio Owner's Equity Total Assets (=) Ownership Ratio 1,540,739 4,208, % 7 Return on Equity Return on Assets Ownership Ratio (=) Return on Equity 2.45% 36.61% 6.70% Zephyr Textiles Limited 20

21 Pattern of Share Holding As on June 30, 2018 Incorporation Number The Companies Ordinance, 1984 (Section 236 (1) & 464) Form 34 Number of Shareholders From Shareholding To Total Shares held ,727 51, , , , ,000 96, ,500 34,500 73,500 96, ,000 60,500 68, , , , , , , , , , ,000 1,561,000 2,166,800 2,465,300 2,857,300 4,460,651 4,485,151 4,761,056 15,109,364 16,823, ,428, Annual Report 2018

22 Categories of Shareholders As on June 30, 2018 Shareholder's category No.of shareholders Share held Percentage 1 Directors, Chief Executive Officer and their spouses and minor children Mr. Mussaid Hanif 2 21,308, Mr. Burhan Muhammad Khan 3 19,600, Mr. Arbab Muhammad Khan 1 2,857, Ms. Tahniat Mussaid 2 4,026, Ms. Sabah Burhan 3 2,759, Ms. Sarah Mussaid 1 50, Ms. Nuzhat Kamran Total 13 50,601, Associated companies, undertaking and 0 related parties 3 Executive 0 4 Public Sector Companies and Corporation 0 5 Banks, Development Financial Institutions, 1 4,761, NonBanking Financial Institutions 6 General public Local 407 2,778, General public Foreign 3 8, Others 6 1,279, Total 417 8,826, Grand Total ,428, Shareholders holding 5% or more Shares held Percentage Mr. Mussaid Hanif Mr. Burhan Muhammad Khan Ms. Tahniat Mussaid The Bank of Punjab, Treasury Division 21,308, ,600, ,026, ,761, Zephyr Textiles Limited 22

23 STATEMENT OF COMPLIANCE WITH THE LISTED COMPANIES (CODE OF CORPORATE GOVERNANCE) REGULATIONS, 2017 Name of Company: ZEPHYR TEXTILES LIMITED (the Company ) For the year ended: June 30, 2018 The Company has complied with the requirements of the Regulations in the following manner: 1. The total number of Directors are seven as per the following: a) Male: 3 b) Female: 4 2. The composition of the Board of Directors is as follow: Category Independent Directors Executive Directors NonExecutive Directors Names Ms. Nuzhat Kamran Mr. Rana Kamal Ud Din Mr. Mussaid Hanif (CEO) Mr. Burhan Muhammad Khan Ms. Tahniat Mussaid Ms. Sabah Burhan Ms. Sarah Mussaid The Directors have confirmed that none of them is serving as a Director on more than five listed Companies, including this Company. The Company has prepared a Code of Conduct and has ensured that appropriate steps have been taken to disseminate it throughout the Company along with its supporting policies and procedures. The board has developed a vision/mission statement, overall corporate strategy and significant policies of the Company. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained. All the powers of the Board have been duly exercised and decisions on relevant matters have been taken by Board / Shareholders as empowered by the relevant provisions of the Act and these Regulations. The meetings of the Board were presided over by the Chief Executive Officer and, in his absence, by a Director elected by the Board for this purpose. The board has complied with the requirements of Act and the Regulations with respect to frequency, recording and circulating minutes of Meeting of Board. The Board of Directors has a formal policy and transparent procedures for remuneration of Directors in accordance with the Act and these Regulations. 23 Annual Report 2018

24 The Board of Directors have arranged Directors Training Program for the following in the year : Ms. Sarah Mussaid The Board of Directors of the Company consist of 7 Directors out of which the following four Directors have obtained a certificate for the Directors Training Program offered by a local institution that meets the criteria specified by the Securities and Exchange Commission of Pakistan ( SECP ): Ms. Tahniat Mussaid Ms. Sabah Burhan Ms. Sarah Mussaid Ms. Nuzhat Kamran The remaining three Directors have undertaken to either apply to SECP for an exemption or be certified prior to the expiration of the requisite deadline. No new appointments of the Chief Financial Officer, Company Secretary and Head of Internal Audit were made during the year. The financial statements of the Company were duly endorsed by CEO and CFO before approval of the Board. The Board of Directors have formed committees comprising of the members given bellow: Audit Committee: Human Resource & Remuneration Committee: Ms. Tahniat Mussaid Ms. Sabah Burhan Mr. Rana Kamal Ud Din Ms. Sabah Burhan Mr. Burhan Muhammad Khan Ms. Nuzhat Kamran The Audit Committee has been reconstituted and effective from June 29, 2018, Mr. Rana Kamal Ud Din, an independent Director replacing Mr. Arbab Muhammad Khan. The terms of reference of the aforesaid committees have been formed, documented and advised to the committee for compliance. The frequency of meetings of the committee were as per following: Chairperson/ Member Member Member Chairperson/ Member Member Member a. Audit Committee 4 quarterly meetings b. HR and Remuneration Committee 1 annual meeting held before Dec 31, 2017 The Board has set up an effective internal audit function and the persons involved are considered suitably qualified and experienced for the purpose and are conversant with the policies and procedures of the Company. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the quality control review programme of the Institute of Chartered Accountants of Pakistan (ICAP), and registered with Audit Oversight Board of Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on Code of Ethics as adopted by the ICAP. STATEMENT OF COMPLIANCE WITH THE LISTED COMPANIES (CODE OF CORPORATE GOVERNANCE) REGULATIONS, 2017 Zephyr Textiles Limited 24

25 STATEMENT OF COMPLIANCE WITH THE LISTED COMPANIES (CODE OF CORPORATE GOVERNANCE) REGULATIONS, The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the Act, these Regulations or any other regulatory requirement and the auditors have confirmed that they have observed IFAC guidelines in this regard. We confirm that all other material principles contained in the CCG have been complied with. Mussaid Hanif Chief Executive Lahore September 28, 2018 Burhan Muhammad Khan Director 25 Annual Report 2018

26 We have reviewed the enclosed Statement of Compliance with the Listed Companies Code of Corporate Governance Regulations, 2017 [the "Regulations"] prepared by the Board of Directors of Zephyr Textiles Limited ("the Company") for the year ended June 30, 2018 in accordance with the requirements of regulation 40 of the Regulations. The responsibility for compliance with the Regulations is that of the Board of Directors of the Company. Our responsibility is to review whether the Statement of Compliance reflects the status of the Company's compliance with the provisions of the Regulations and report if it does not and to highlight any noncompliance with the requirements of the Regulations. A review is limited primarily to inquiries of the Company's personnel and review of various documents prepared by the Company to comply with the Regulations. As part of our audit of the financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board of Directors' statement on internal control covers all risks and controls or to form an opinion on the effectiveness of such internal controls, the Company's corporate governance procedures and risks. The Regulations require the Company to place before the Board Audit Committee, and upon recommendation of the Board Audit Committee, place before the Board of Directors for their review and approval, its related party transactions and also ensure compliance with the requirements of section 208 of the Companies Act, We are only required and have ensured compliance of this requirement to the extent of the approval of the related party transactions by the Board of Directors upon recommendation of the Board Audit Committee. We have not carried out procedures to assess and determine the Company's process for identification of related parties and that whether the related party transactions were undertaken at arm's length price or not. Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance does not appropriately reflect the Company's compliance, in all material respects, with the requirements contained in the Regulations as applicable to the Company for the year ended June 30, Lahore September 28, 2018 Azhar Zafar & Co. Chartered Accountants Engagement Partner: Talat Mehboob INDEPENDENT AUDITOR'S REVIEW REPORT TO THE MEMBERS OF ZEPHYR TEXTILES LIMITED. REVIEW REPORT ON THE STATEMENT OF COMPLIANCE CONTAINED IN THE LISTED COMPANIES (CODE OF CORPORATE GOVERNANCE) REGULATIONS, 2017 Zephyr Textiles Limited 26